Rahman v Dubs (No 2)

Case [2012] FCA 1081

FEDERAL COURT OF AUSTRALIA

Rahman v Dubs (No 2) [2012] FCA 1081

Citation: Rahman v Dubs (No 2) [2012] FCA 1081
Appeal from: Dubs v Rahman [2012] FMCA 664
Parties: MOHAMMAD TABIBAR RAHMAN v ROSALIND V DUBS
File number: NSD 1092 of 2012
Judge: FLICK J
Date of judgment: 5 October 2012
Catchwords:

BANKRUPTCY – sequestration order – appeal against sequestration order – pending proceedings in relation to debts owed – whether sequestration order should be made before proceedings finally determined

CONSTITUTIONAL LAW – constitutional power to enact Bankruptcy Act 1966 (Cth) – Constitution s 51(xvii) – plenary power in relation to bankruptcy

PRACTICE AND PROCEDURE – notice of constitutional matter – Judiciary Act 1903 (Cth) s 78B – whether Court bound to not proceed in all cases – nature of “imperfect obligation”

Legislation: Bankruptcy Act1924 (Cth) s 209
Bankruptcy Act1966 (Cth) s 52
Constitution s 51(xvii)
Crimes Act1914 (Cth)
Federal Court Rules2011 (Cth)
Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) r 4.06
Judiciary Act1903 (Cth) s 78B
Uniform Civil Procedure Rules2005 (NSW)
Cases cited:

Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137, considered
Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd [1999] FCA 1151, 95 FCR 292, considered
Burgess v Permanent Custodians Ltd [2010] FCA 986, cited

Deputy Commissioner of Taxation v Caporale Group Pty Ltd [2011] FCA 1189, cited

Deputy Commissioner of Taxation v Cumins [2008] FCA 353, 101 ALD 78, cited
Deputy Commissioner of Taxation v Warrick (No 2) [2004] FCA 918, 56 ATR 371, cited
Dolman, Re; Ex parte Elder Smith Goldsbrough Mort Ltd (1967) 10 FLR 384, cited
Dubs v Rahman [2012] FMCA 664, affirmed
Glennan v Commissioner of Taxation [2003] HCA 31, 198 ALR 250, cited
Gould v Day [2000] FCA 1673, cited
In re Richard Foreman & Sons Pty Ltd v Federal Commissioner of Taxation (1947) 74 CLR 508, cited
R v Federal Court of Bankruptcy; Ex parte Lowenstein (1938) 59 CLR 556, cited
Rahman v Dubs [2012] NSWSC 1065, referred to
Rigg v Baker [2006] FCAFC 179, 155 FCR 531, cited
Russell v Polites Investments Pty Ltd [2012] FCA 11, cited
Stuart-Robertson v Lloyd (1932) 47 CLR 482, cited
The Queen v Davison (1954) 90 CLR 353, cited

Date of hearing: 26 September 2012
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 26
Counsel for the Appellant: The Appellant appeared in person
Solicitor for the Respondent: Mr M Rose of Norton Rose

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1092 of 2012
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN:

MOHAMMAD TABIBAR RAHMAN
Appellant
AND:

ROSALIND V DUBS
Respondent

JUDGE:

FLICK J

DATE OF ORDER:

5 OCTOBER 2012

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.The appeal is dismissed.

2.The Appellant is to pay the costs of the…

Continue reading Rahman v Dubs (No 2)

Sign in free to access the full text

Details
AGLC
Rahman v Dubs (No 2) [2012] FCA 1081
Case
[2012] FCA 1081
Decision Date

CaseChat Overview and Summary

In Rahman v Dubs (No 2), the appeal was brought by the bankrupt, Mr Rahman, against a sequestration order made by the Federal Magistrates Court. The primary issue before the court was whether the Federal Magistrate was required to refrain from making a sequestration order pending the determination of proceedings relating to the debts claimed by the creditor, Ms Dubs. This matter raised questions regarding the constitutional power of the Commonwealth Parliament to enact the Bankruptcy Act 1966 (Cth), the interpretation of section 78B of the Judiciary Act 1903 (Cth) and the principles governing the discretion of the Court to make a sequestration order.

The Federal Court found that the Federal Magistrate did not err in proceeding with the hearing of the creditor’s petition. The court determined that the notice provided by Mr Rahman under section 78B did not sufficiently identify a constitutional matter, and thus did not impose a duty on the Federal Magistrate to refrain from making a sequestration order. The court also held that the making of a sequestration order was appropriate given the proof of the required elements under section 52(1) of the Bankruptcy Act. Furthermore, the court emphasised that while there is a “prima facie right” to a sequestration order, the court retains a discretion to refuse such an order for other sufficient cause, particularly where an appeal against the underlying judgment is pending and based on genuine and arguable grounds.

The court concluded that the appeal was without substance and dismissed it. It further ordered that Mr Rahman pay the costs of the proceeding, including those incurred due to the adjournment of the hearing. The court found the form and content of the Notice of Appeal to be inadequate, lacking any identification of an appellable error. Consequently, the sequestration order made by the Federal Magistrates Court was upheld.

Orders

Orders of the court

1. The appeal is dismissed.

2. The Appellant is to pay the costs of the Respondent, including the costs thrown away by reason of the adjournment of the hearing on 12 September 2012.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The Federal Magistrate did not err in continuing to hear the Creditor’s Petition. He was not under any “duty not to proceed”. The purported s 78B “Notice” relied upon by Mr Rahman failed to identify any “constitutional matter” so as to enliven the “duty” imposed by s 78B(1). CONCLUSIONS The appeal is dismissed. It is without substance. The form in which the Notice of Appeal was filed in this Court only provides a further reason to dismiss the appeal. The “Grounds of Appeal” are embarrassing and fail to identify any appellable error. There is no reason why Mr Rahman should not be ordered to pay the costs of the Respondent, including the costs thrown away by the adjournment of the hearing on 12 September 2012.THE ORDERS OF THE COURT ARE:1.The appeal is dismissed.2.The Appellant is to pay the costs of the Respondent, including the costs thrown away by reason of the adjournment of the hearing on 12 September 2012.

Ratio Decidendi

Legal Principle Established

No question arises as to the constitutional competence of the Commonwealth Parliament to enact the Bankruptcy Act or to make provision for the issue of a bankruptcy notice or the making a sequestration order. THE MAKING OF THE SEQUESTRATION ORDER Upon proof of the matters set forth in s 52(1) a petitioning creditor has been said to have a “prima facie right” to the making of a sequestration order: Deputy Commissioner of Taxation v Cumins [2008] FCA 353 at [14], 101 ALD 78 at 81 per Gilmour J. See also: Re Dolman; Ex parte Elder Smith Goldsbrough Mort Ltd (1967) 10 FLR 384 at 391 per Gibbs J; Burgess v Permanent Custodians Ltd [2010] FCA 986 at [37]; Russell v Polites Investments Pty Ltd [2012] FCA 11 at [23]. Section 52(1) provides as follows:At the hearing of a creditor's petition, the Court shall require proof of: (a)the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient); (b)service of the petition; and (c)the fact that the debt or debts on which the petitioning creditor relies is or are still owing; and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.The orders made by the Supreme Court were in evidence before the Federal Magistrate. One particular matter of which the Appellant complains is the fact that the Federal Magistrate treated an Affidavit sworn by the petitioning creditor, Ms Dubs, on 27 June 2012 as satisfying the requirements of r 4.06 of the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth). That rule requires an Affidavit be sworn and filed “as soon as practicable before the hearing date for the petition” stating that “each debt on which the applicant creditor relies is still owing”. An Affidavit sworn closer to the date of the hearing some three weeks later was not possible as Ms Dubs was by then in Switzerland “on a family vacation that [had] been planned for some time”. Her Affidavit stated that as at 27 June 2012, the amount of $56,298.46 “is still wholly due and unsatisfied”. In placing reliance upon this Affidavit, the Federal Magistrate committed no appellable error. As stated by the Federal Magistrate, he was “satisfied that Mr Rahman, whilst disputing the existence of the debts, has not made any payment of them”. The Federal Magistrate also considered whether there was “other sufficient cause” for not making a sequestration order, as contemplated by s 52(2)(b). Notwithstanding references to the “prima facie right” to obtain a sequestration order, s 52(2)(b) “confers a discretion on the Court to refuse to make a sequestration order ‘for other sufficient cause’, ie for a cause other than that the debtor is solvent, a circumstance provided for in s 52(2)(a)”: Gould v Day [2000] FCA 1673 at [52] per Heerey, Moore and Goldberg JJ. Where reliance is placed by a debtor upon an outstanding appeal, it has been said to be “… well established that in general a court exercising jurisdiction in bankruptcy should not proceed to sequestrate the estate of a debtor where an appeal is pending against the judgment relied on as the foundation of the bankruptcy proceedings provided that the appeal is based on genuine and arguable grounds”: Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137 at 148 per Davies, Lockhart and Neaves JJ. See also: Rigg v Baker [2006] FCAFC 179 at [67], 155 FCR 531 at 545 per French J; Deputy Commissioner of Taxation v Caporale Group Pty Ltd [2011] FCA 1189 at [18] per Yates J.